Netflix CEO is banking on broken relationships

Sharing is caring, but content makers may see things differently.

By Benzinga Jun 17, 2013 3:55PM
By Louis Bedigian

Thousands of people share Netflix (NFLX) with their family and friends.

But Reed Hastings, Netflix's CEO, isn't too worried about the problem, according to Gigaom. While this may have surprised some investors, there may be a good reason for his nonchalant attitude.


"He doesn't seem to care because it's not his content," Rich Tullo, Director of Research at Albert Fried & Company, told Benzinga. "He's leasing the content, so if he can convert one or two of those 10 people sharing, what's it to him? That's a good thing for him. Sure he wouldn't care. I wouldn't care either if I were him."


The same cannot be said of content makers.


"Viacom (VIA) cares, obviously, because they pulled Nickelodeon out," said Tullo. "Time Warner (TWX) cares because they pulled old movies out. They should care. If Netflix's subscribers are up 25% year-over-year but usage is up 30 to 40% year-over-year, then all that means is that there's got to be a lot of people sharing -- I call it squatting. Netflix squatting."


Tullo said that if you interview 10 or 15 college kids you may find that only one of them actually pays for the Netflix account they're all using/sharing.


Couple on sofa watching television together copyright Blend Images, Hill Street Studios, the Agency Collection, Getty Images"Sure it's great!" he said. "I would think it's great too if someone was paying and I got all this free TV."


Instead of cracking down on sharing, Tullo believes that Netflix is waiting for fate to take its 

course.


"Reed Hastings is banking on the fact that the guy breaks up with his girlfriend and he creates an incremental subscription from that because they were sharing and now they're no longer sharing," said Tullo.


"But really, if I'm the content guy, I'm Lionsgate (LGF), and I've distributed something there… I'm Kevin Spacey, I just produced this great series, they pay me $50 million for it, and I find out that a lot more people watched it than I'm getting credit for, for producing it. They've got the stock up. Reed Hastings is a billionaire, and all I'm paid is $50 million when I could have went straight to video or HBO and get a cut of the action? It's a big deal."


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3Comments
Jun 17, 2013 4:11PM
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"and all I'm paid is $50 million..." wahhh. Must be tough.
Jun 17, 2013 11:19PM
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Jun 18, 2013 12:55PM
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I know that our house is watching more Netflix than ever because there is really nothing worth watching on TV. Besides, only one stream can be active at any given time, if I understand how it works
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